Iluka Resources (ILU)

Commonwealth Bank has rated
Iluka Resources
“underweight" after its first-quarter production report showed that zircon, rutile and synthetic rutile production was down 33.2 per cent on the December quarter and down 48.9 per cent on the first quarter of 2012.

Revenue of $139.9 million was also down 21 per cent on the previous corresponding period, from $177.1 million. The company announced further production curtailments because of ongoing weak market conditions.

CBA says the suppressed production volumes and further production curtailments point towards ongoing market weakness and uncertainty in the near term. The curtailments are a positive initiative to rein in costs with Iluka’s substantial inventories providing capacity to meet sales, but also highlight the ongoing depressed price and volume environment.

Iluka did not change its 2013 guidance, with total sales forecast to be above production at 440 kilotonnes. CBA expects only modest medium-term demand recovery. Earnings per share were 86.3¢ in 2012. CBA forecasts EPS at 37.9¢ in 2013, 54¢ in 2014 and 59.1¢ in 2015.